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ABSTRACT

Lufthansa has a tradition of concluding collective agreements on employment and competitiveness dating back almost

two decades. Early agreements, however, were not directed at employment, but at employment conditions. In the early

1990s, the first of a series of pacts for safeguarding competitiveness (Pakt fr Wettbewerbssicherung) was negotiated.

These agreements helped Lufthansa to get back on track through moderate personnel cost increases, increased

productivity, a downward revision of the wage rate structure, a deferral of collectively agreed pay increases and the

exceptionally long duration of collective agreements. During the restructuring process, elaborate communication and

participation structures (most of which had been specially developed to aid the process) significantly contributed to

communicating and legitimising the restructuring measures and the success of the whole process. Employee

representatives were informed and consulted about steps to be taken. The trade unions and the works councils made

suggestions and also had considerable influence on the contents of the agreements. During the 1990s, the Lufthansa

group underwent a fundamental transformation from a largely State-owned company organised on similar lines to an

administrative authority into a modern, lean, flexible and market-oriented privatised group. Overall, the pacts are

regarded as a success, although there was some conflict over certain items, chiefly between the two representative trade

unions.

INTRODUCTION

Deutsche Lufthansa AG (Lufthansa) was founded in 1926 and was re-established after World War II, in 1953. Lufthansa

is Germanys largest airline, and one of the largest airlines in the world. It is a globally oriented group with more than

250 subsidiaries and associated companies. The companies in the group are either in the air industry or supply backup

in the tourist or airport ground handling business - for instance, airlines, logistics, maintenance, catering or IT service

providers. Formerly majority-owned by the Federal Republic of Germany, Lufthansa is now a public company owned

by about 490,000 shareholders. The parent company of the Lufthansa Group is Deutsche Lufthansa AG. It operates

Lufthansa German Airlines in the form of an autonomously functioning but legally dependent profit centre. This is a

reflection of the special importance of the scheduled passenger business in terms of resources, decision-making and core

relevance. For all other business segments, Lufthansa AG exercises its leading role by acting as a holding company for

strategic management.

In 1997, Lufthansa German Airlines was the largest company in the group, with a staff of some 28,000 and revenue of

DM 15 billion (see Table 1). 12,000 staff were flight crew, 9,000 were flight attendants and over 3,000 were pilots, co-

pilots or flight engineers. Meanwhile, Lufthansa Technik AG (engineering) employed more than 10,300 people,

Lufthansa Cargo AG roughly 5,000 and Lufthansa Systems GmbH about 1,300 (annual averages). The new group

structure led to a high degree of transparency in costs and results, and intensified contacts between the different units

and their markets and customers. They transported 44.4 million passengers and 1,703,657 tonnes of freight and mail on

635,500 flights. The revenue for 1997 was as follows: passenger transportation, 72%; freight, 15%; aircraft maintenance,

6%; catering services, 2%; mail, 1%; travel services and commissions, 1%; sales from insurance business, 1% and other,

European Foundation for the Improvement of Living and Working Conditions, 2002


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2%. Total employment at Lufthansa increased from 47,150 in 1987 to 63,645 in 1992. Between 1992 and 1998, it

decreased every year except for 1996, and by 1998 it stood at 54,867.

BUSINESS INDICATORS, 1987-98 Table 1

Source: Lufthansa (Annual Reports)

According to management information, about 25% of Lufthansas employees are trade union members. Three out of

four union members are with the TV, and one out of four are with the DAG. TV organises ground staff and cabin

staff. DAG organises cabin staff and cockpit staff. The composition of the works councils varies according to location

and business area. Collective bargaining at Lufthansa has developed into a relationship of trust between management

and employee representatives, and has been labelled trustful collective bargaining policy (vertrauensvolle

Tarifpolitik). Lufthansa is not subject to any sectoral collective agreement but concludes group and company

agreements. The group agreements currently cover 20 companies, some of which are subject to special clauses. Until

recently, there have been separate agreements with TV and DAG. Furthermore, provisions usually distinguish

between ground staff, cabin staff and cockpit staff. In 1997, DAG and TV jointly negotiated a collective agreement

for the first time. In future, one can expect either a bargaining cartel between the two unions or, in the case of a

merger of the two unions, a single collective bargaining unit covering all employees except for pilots (who are very

likely to negotiate their own agreements through their own trade union).

RATIONALES OF THE PARTIES

During the 1990s, the Lufthansa group underwent a fundamental transformation in structure and ownership. By 1991/92Lufthansa found itself in deep crisis with severe financial losses being encountered. There were numerous reasons for

Pacts f or em ploy ment and compet it iveness: case stu dies


Average number

of employees

Turnover Turnover

peremployee

Personnel

expensesper

employee

Profit on

ordinaryactivities

beforetaxation

Net profit

for the year

31/12 Thousands % DM

billion

% DM

thousand

DM

thousand

DM million DM million

1987 47,150 10,961 232 76 327 89

1988 49,056 4,0 11,845 8,1 241 80 522 821989 51,942 5,9 13,055 10,2 251 83 564 110

1990 57,567 10,8 14,447 10,7 251 83 36,1 15

1991 61,791 7,3 16,101 11,4 261 84 -560 -426

1992 63,645 3,0 17,239 7,1 271 92 -735 -391

1993 60,514 -4,9 17,731 2,9 293 90 75 -92

1994 58,044 -4,1 18,856 6,3 325 91 734 302

1995 57,586 -0,8 19,900 5,5 346 94 756 1,476

1996 57,999 0,7 20,863 4,8 360 99 686 558

1997 55,520 -4,2 21,610 3,6 390 99 1,749 1,077

1998 54,867 -1,2 22,654 4,8 413 102 2,432 1,431


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Luf t hansa AG

the crisis. Germany, like many other industrialised countries, was hit by a recession by which time a fundamental

structural change had taken place in the air transport business. Excess capacity led to a collapse of demand during the

Gulf War. The situation was made even more dramatic as the cartel of the International Air Transport Association (IATA),

with its regulated system of prices and tariffs, became exposed to competition. The third stage of the liberalisation of the

transport services in the European Union started in 1993 and was completed in 1997. Today, each EU airline is allowed

to determine its own capacities and prices. Lufthansa, as well as its EU competitors, found itself in need of structural

change. In contrast to the French and Southern European airlines, which followed the strategy of demanding and

receiving public subsidies in order to finance price competition and contain social conflicts, the change process at

Lufthansa was different; it included the three phases listed in Table 2.

PHASES OF RECONSTRUCTION Table 2

Before the crisis, Lufthansas organisation was monolithic and very similar to an administrative body with many levels

of hierarchy. Lufthansas personnel management style was similar to that in the public sector, with far reaching

employment security and restrictive dismissals provisions. Reward structures very much resembled those of the public

sector. In comparison to its competitors, especially British Airways, Lufthansa was said to have paid 25% higher wages.

Since the early 1990s, Lufthansa has gradually transformed and modernised its personnel management practices. The

company has a personnel policy based on the following seven pillars: partnership-oriented collective bargaining,

flexibility, employee participation, Lufthansa School of Business, employability initiatives, high quality leadership, and

service quality. Personnel strategy is closely integrated in the overall company strategy. In the years since privatisation,

Lufthansa has taken various measures to involve all employees in the companys success and to thereby enhance staff

motivation. These include variable bonuses for senior managers, profit sharing for employees and share ownership,

which at the time of writing covers some 30,000 Lufthansa employees. In total, they now own more than 5% of totalequity.


Phase 1 (1992-95) Operative reconstruction

Stretching out depreciation

Selling of assets

Reduction in capacity

Reduction in workforce

Increasing productivity

Phase 2 (1993-96) Structural reconstruction

Process-oriented optimisation

Reduction of stages of production

Business areas

Phase 3 (1994-99) Strategic reconstruction

Completion of privatisation

Establishment of co-operation and partnerships in all businessareas


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PROCESS

Operative restructuring - 1992-1995

Prior to the crisis of 1991-92, the company had already concluded an agreement on issues of employment and

competitiveness. The 3-year agreement, signed on 6 October 1990, aimed to safeguard and create jobs. The parties

agreed that the expansion of Lufthansa should be achieved by internal growth only, and not by outsourcing or other

activities. Furthermore, they agreed that the structure of personnel costs should be made more competitive. These

involved a number of notable concessions by employees: a reduction in entry wage levels, employee concessions in

grading, and suspension of the working time reductions collectively agreed in 1988, without any compensating wage

increase.

The first phase of the restructuring process included the years 1992 and 1993 and may be summarised under the heading

consolidation and operative restructuring. Drastic fire-fighting measures followed, with the aim of reducing unit

labour costs and adjusting personnel. The entire restructuring process after 1992 was accompanied by activities that may

be termed collective bargaining on employment and competitiveness. Whilst there was no single employment pact,

there was a series of activities during the whole transformation period that made up a continuous process of securing

jobs and achieving competitiveness. These activities have been closely intertwined with the groups overall business and

transformation strategy (see Table 3).

PHASES OF RECONSTRUCTION AND EM PLOYM ENT Table 3

The goal of Lufthansas management in the restructuring process was to rescue and expand the company by achieving

a competitive market position, and to thereby become permanently profitable and fit for survival. It was therefore a win

- win approach, and not a policy not to threaten jobs, to make employees worse off, to undermine codetermination or to

undercut collective agreements. The works council and the trade unions aimed to represent the interests of the workforce

and ensure the maintenance of the maximum possible number of jobs at Lufthansa. A special task force of managerial

staff, Programme 93, was set up and developed. It included 123 change measures, and was approved by thesupervisory board during a special meeting on 31 August 1992. Some of these measures were as follows:



Phase 1 (1992-95) Operative restructuring

Reduction of unit costs

Reduction of workforce

Phase 2 (1993-96) Structural restructuring

Independent business areas

Safeguarding of employment

Phase 3 (1994-99) Strategic restructuring

Establishment of relational networks in all business areas

Employment growth


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n Personnel reductions: by the end of 1994 the workforce was to be reduced by 6,000 (3,000 in 1993 and 1994,

respectively), mainly by voluntary offers and increases in part-time employment, but also by redundancy where

necessary. In 1992, Lufthansa had already reduced its workforce by 2,000;

n Reduction of operating expenses by DM 320 million in 1993 and a further DM 850 million in 1994. In order to achieve

this, 30 measures were to be implemented immediately, a further 80 later; and

n Improvements in revenues of DM 700 million were to be achieved by aggressive price strategies and increased

flexibility.

Phase one of the restructuring process was very much associated with workforce adjustments, i.e. reductions to be

achieved in socially acceptable ways. Calculated in full time equivalents, the workforce was reduced from over 48,000employees in June 1992 to below 40,000 in December 1994. Excess capacities were reduced, assets sold or released, and

routes consolidated.

The negotiations of the 1992 agreement on restructuring (Sanierungstarifvertrag) were overshadowed by conflicts over

Lufthansas plans to establish Lufthansa Express as an independent company, operating on the German (and later also

European) routes at competitive prices, costs and wages. The trade unions preferred a model according to which

Lufthansa Express would be a division within Lufthansa.

During the negotiations, in early August 1992, the management board announced proposals which involved a months

cut in board members wages. In mid-August 1992, DAG indicated a willingness to accept certain measures, including

the abolition of the extra months pay, provided that Lufthansa Express would not be disincorporated. TV rejected the

plans and said it would not agree working time extensions and substantial cuts in benefits. On 31 August 1992, Lufthansa

concluded two parallel collective agreements with the trade unions TV and DAG. Reportedly, the biggest problems in

reaching the agreements arose not only between Lufthansa and the two unions, but also between the two trade unions.

As regards wages, both parties agreed a twelve month wage freeze until 30 September 1993.

In order to support the implementation of the programme to safeguard competitiveness and to create adequateorganisational and work structure, both sides agreed to establish joint structural groups (Strukturgruppen) along

departmental lines (consisting of three employer and three employee representatives) by the end of 1994. The employee

representatives were to be appointed by the group works council, after consultation with the social partners. On the

employer side, two members of management and the head of personnel responsible for the department were to be

appointed.

Generally the 1992 agreements met their objectives; total savings of DM 386 million were recorded in 1993. Targets for

personnel reductions were also achieved. Personnel reductions between 1 February 1993 and 30 April 1994 were

achieved by the following means:


Luf t hansa AG


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n cancellation of contracts, including pay-outs (45%);

n

unpaid holiday (11%);

n early retirement (18%);

n termination of contracts by the employee (5%);

n part-time jobs (3%); and

n non-renewal of temporary contracts (4%).

In mid-1994, the targets of phase one had been accomplished. Between June 1992 and June 1994, the workforce was

reduced by 17% and costs per unit by 15%. Productivity had increased by 31%. The worst was over, and Lufthansa was

fit for survival.

Structural restructuring - 1993-1996

At the beginning of 1994, with prior consent of the employer and shareholder representatives in the supervisory board,

phase two of restructuring was initiated. Phase two focussed on the issues listed below; the overall aim with regard to

personnel was the maintenance of employment. Lufthansa set itself a number of goals related to the revision of company

structure, the most important of which were:

n the establishment of smaller units, which were closer to their product markets and easier to manage;

n the segmentation of the group into market-oriented business units;

n the establishment of permanently competitive cost structures; and

n continuous benchmarking processes against external competition.

Lufthansa adjusted itself to markets and competition and reoriented its strategy. The whole process of restructuring was

conducted in an atmosphere of open communication. Phase three of the restructuring process was about reorganising

Lufthansas organisational structure and creating networks of international relationships, such as strategic alliances and

co-operation. In the personnel area, the goal was to increase employment. After initial discussions and signs of

impatience concerning the restructuring processes, the supervisory board unanimously voted for a strategic reorientation

of the group. At this stage, some fears were voiced that a reorientation would endanger jobs, undermine codetermination

rights and undercut collective agreements. According to management, the goals of phase three were:

n to make the company fit for competition;

n to safeguard jobs, to make the group profitable;




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Luf t hansa AG

n to enhance financial participation of the employees in Lufthansas success; and

n

to prepare the employees for continuous improvement processes.

In 1995, the Lufthansa group was given a completely new structure. Important business areas (freight, engineering and

data processing) became independent companies and business units within the Lufthansa group, responsible for their

own earnings results.

Strategic restructuring - 1997-1999

In October 1997, Lufthansa became fully privatised. 37.5% of Lufthansa shares, including the former 35.7 stake held by

the government, were sold to the public. Since 1 April 1997, Lufthansas passenger business has been run as an

autonomous business unit (Lufthansa German Airlines). This move was Lufthansas response to the new competitive

situation resulting from the liberalisation of air travel within the EU, new cut-price rivals and intensified downward

pressure on fares. The aim behind the move was to achieve enhanced market orientation and greater flexibility. In May

1996, Lufthansa had launched its Programme 15, with the aim of cutting costs per seat-kilometre by 4% per year and

implementing short-term retrenchment measures, to result in a total cost saving volume of DM 1.5 billion by the year

2001. Judging by the measures implemented so far, the cost saving objective may already have been achieved during

1999.

The DAG criticised the 1996 agreement with the TV for its long duration, and demanded a higher wage increase. Afterlengthy negotiations and industrial action, DAG accepted the October 1996 deal on 9 April 1997, after TV and DAG

jointly reached agreement with Lufthansa on additional measures to safeguard employment. Furthermore, the Lufthansa-

DAG deal provides for an increase in the profit-sharing bonus of DM 100 and an overtime pay rise for cockpit staff.

Lufthansa, TV and DAG agreed on the continuation of the existing collective agreement that maintains the status quo

for cabin crew, as well as the existing general agreement on pay grades for ground staff, for another 3 years.

CONTENTS OF THE AGREEMENTS

Details of the various agreements are contained in Table 4. It shows that significant employee concessions were made

in return for employment guarantees.



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OVERVIEW OF M AJOR COLLECTIVE AGREEMENTS AT LUFTHANSA IN THE 1990s Table 4

1992 agreements

Turning to the individual agreements, details of the groundbreaking 1992 agreements are contained in Table 5. The 1992

Lufthansa-TV agreement renewed (with a number of changes) pay agreements for ground staff, cabin staff and

vocational trainees until 30 September 1993. Furthermore, framework agreements on working time were again put in

force. It was also agreed that Lufthansa Express should become a division of Lufthansa AG. The two TV and DAG

agreements brought a number of changes for ground staff covering the suspension of the annual increment, the shift

premium system and working time annualisation. As a consequence, overtime premiums were only to be paid if working

time was not balanced out after up to 6 months.



1990 Major salary adjustments for ground and cabin staff associated with theintroduction of a two-tier pay structure

New working time structures for cockpit staff to increase productivity

1991 6 month suspension of pay scale increase for all staff, and compensation throughlump sum payments instead

1992 12 month wage freeze for all staff

Working time annualised

Narrower salary structure for cockpit staff

Reduced salary development

For cabin staff, a new salary structure and a transition period with a 3-year payfreeze

For ground staff, adjustment of shift allowances made and overtime pay reduced Models for socially acceptable workforce reductions

1994 Provisions on the protection of acquired rights for staff being transferred to newsubsidiaries

Postponement of salary increases by 6 months

Framework agreement on converting Lufthansas State run pension plan into a

more flexible company pension fund

1995 Cabin staff may be paid according to a two-tier system, depending on country oforigin. Stewards hired abroad are subject to the same employment conditions as

those employed in Germany, except for wages, which shall be fixed according tothe local going rate, even if both groups of employees are on the same plane.However, the share of stewards employed abroad may not exceed 10% of all

stewards employed at Lufthansa.

1996 27 month agreement increases pay by 1.7%, plus lump sum payment

Additional measures to safeguard employment

Agreement on semi-retirement for the Lufthansa Groups employees in Germany

from immediately when the Act on Semi-Retirement became law (TarifvertragAltersteilzeit)

1999 Pay rise of 3.5% and a share of company profits for employees in the 1998 business

year


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Luf t hansa AG

PRODUCTIVITY AND COM PENSATION RELATED MEASURES OF THE 1992 AGREEMENT Table 5

For cabin staff, changes regarding compensation were most important. First, new grading and pay scales were

introduced. Changeover to the new systems involved the following steps:

n a pay freeze (limited to 3 years);

n an annualisation of hours for the system of extra flight hours (Mehrflugstundensystematik);

n a reduction in the duration of vocational training (lower the basic pay for trainees); and

n the introduction of measures to support part-time work.

The implementation of the collectively agreed working time reduction (agreed in 1988) was suspended. For cockpit staff,

a group agreement was concluded for the first time, which covered almost all Lufthansa companies. The agreement

included new compensation structures, which in some cases reduced pay levels and introduced pay ceilings, amounting

to future cost reductions of about 25%. Employees who had already reached (or exceeded) the ceiling before the

introduction of the new system were not to be made worse off. For such employees, future pay increases were fixed at

50% of the collectively agreed increase. Group-wide minimum levels of employment conditions were to be fixed. Within

the framework of these minimum rules, different employment conditions could be agreed at establishment level.


Productivity Compensation

Ground staff Flexible annualised workingtime

Postponement of annual salaryincrease

Reduction of days-off

Flexible shift work

Increased use of productivityreserves

Introduction of supplementaryperformance-related pay

elements

Slower gradual compensationincreases

Cabin staff Flexibility concerning days off

Flight and rest time according tolaw

Reduction of days-off

Cost efficient rules for crew

reinforcement on long-distanceflights

New compensation structure

Phased compensation increases

Cockpit staff Re-organisation of contingencyplans

Flexibility concerning days off

Intelligent part-time models

Market-oriented adjustment ofcompensation structures

Reduction in variable expensesfor flight hours


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1994 agreements

The 1994 collective agreement, which was valid for 48 months from 1 June 1994, contained general employment

security provisions. First, dismissals for economic reasons were to be avoided by measures to safeguard employment. If

there was an employee surplus, the provisions of the collective employment protection agreement (Schutzabkommen)

applied. If this was not satisfactory, the relevant parties had to negotiate measures (for example, a working time

reduction) in order to maintain permanent employment. If there was really no other option than to make people

redundant, the redundancy procedure had to take place according to the rules prescribed by the Lufthansa social plan.

The framework agreement on protection of existing employment conditions, the so-called Bestandsschutz agreement,

guaranteed that employees would not become worse off due to the process of reorganisation and would continue to enjoy

the same standards after reorganisation. The Bestandschutz agreement was subsequently extended until the year 2000.In cases where group companies outside the dominant influence of Lufthansa became insolvent, Lufthansa committed

itself to taking on affected employees and giving them a 5-year employment guarantee. For employees with contracts

that cannot be terminated by giving notice (i.e. employees with 15 years employment with Lufthansa), this job guarantee

was unlimited.

The contentious issue of the State-run supplementary staff pension funds (Versorgungsanstalt des Bundes und der

Lnder, VBL), which resembled systems for civil servants, was seen as an obstacle to privatisation. The issue was

resolved by federal aid of more than DM 1.0 billion and the use of DM 1.1 billion of Lufthansas savings to transform

the traditional system into a company pension fund. In 1996, immediately after the Act on Partial Retirement was passed,

the negotiating parties at Lufthansa concluded an agreement on partial retirement (Tarifvertrag Altersteilzeit) for the

groups employees in Germany.

1996 agreements

In October 1996, Lufthansa and TV concluded a pay settlement that bound both parties for a period of 27 months, until

31 December 1998. The agreement included:

n an increase in wages and salaries of 1.7% from 1 April 1998;

n a lump sum payment equivalent to 1.7% for the period 1 October 1996 to 31 March 1998;

n 100% sick pay;

n a profit-sharing scheme; and

n an increase in the wage paid under the scheme for part-time work for older workers (Altersteilzeit) to 85% of the last

net income.




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Furthermore, a special collective agreement on employment (Beschftigungssicherung und Frderung von Ausbildung)

was concluded on 30 September 1996, which included provisions aimed at avoiding redundancies and taking on

vocational trainees in 1997 and 1998 (upon successful completion of their training). The duration of the agreement was

similar to the pay agreement. The agreement states in paragraph 2 (Beschftigungssicherung):

For the period of duration of the remuneration agreement, the companies covered by the remuneration agreement commit

themselves:

To avoiding personnel reductions by means of redundancy for economic reasons by measures

which safeguard employment.

If, despite all measures to safeguard employment, and after all means of the Schutzabkommen

collective agreement are exhausted, redundancies for economic reasons cannot not be avoided,

the parties to this agreement agree to start negotiations in order to find adequate ways (e.g.

qualification, working time reduction), i.e. agree measures with the aim of permanently

safeguarding employment.

As regards vocational training, both sides agreed to maintain, and if possible to increase, the number of vocational

training places.

1999 collective agreement

On 24 February 1999, a collective agreement was jointly concluded by TV and DAG, providing for a pay rise of 3.5%

from 1 March 1999, a lump sum payment of DM 440 for January and February 1999, and a share of company profits

for employees from the 1998 business year. The wage agreement is valid for 13 months.

EFFECTS OF AGREEM ENT

Lufthansas pact for safeguarding competitiveness (Pakt fr Wettbewerbssicherung) was not a narrow or single activity,

but included several agreements during the restructuring process. These agreements helped Lufthansa to get back on

track via moderate personnel cost increases, increased productivity, a downward revision of the wage rate structure, a

deferral of collectively agreed pay increases, and the exceptionally long duration of collective agreements. During the

restructuring process, elaborate communication and participation structures (most of which had been specially developed

to aid the process) significantly contributed to communicating and legitimising the restructuring measures and the

success of the whole process. Employee representatives were informed and consulted about steps to be taken. The trade

unions and the works councils made suggestions and also had a considerable influence on the contents of the agreements.



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The following factors contributed to the success of the restructuring process and the employment measures:

n the fact that management strategy, personnel policy and labour relations, including the collective agreements, went

hand in hand and were closely linked; and

n the fact that traditionally co-operative, consensual and relatively peaceful labour relations at Lufthansa smoothened

the whole process of implementation.

Fritz-Heinz Himmelreich, managing director at the Confederation of German Employers Associations BDA

(Bundesvereinigung der deutschen Arbeitgeberverbnde), stated that he regarded Lufthansas 1992 deal (especially the

clauses for company level variations from agreements) as a positive signal for adjustments in wage policy, made

necessary by increasing and changing competition in the world economy.

Opinions among employees as to the alliance were mixed. According to TV, the 1992 agreement at Lufthansa should

not be regarded as a model to be replicated, but as a special case to help a troubled company survive. TV board member

Eike Eulen considered the establishment of the structural groups as a success and said the union was able to influence

the contents of the agreement. AG chief-negotiator Herbert Gartz regarded the agreement as an option to solve

Lufthansas financial problems from within. The then collective bargaining expert of the DGB (Deutscher

Gewerkschaftsbund), Lothar Zimmermann, warned against using collective bargaining as a means of conducting

restructuring processes in companies. He said that experiences teach that, as a rule, companies would not be saved andthe importance of collective agreements would be diminished.

Although in general, labour relations at Lufthansa have been co-operative, problems emerged between the trade unions

with regards to certain employee groups. During the restructuring process, it appeared to be very difficult to get the

cockpit staff (who were highly organised, were acting in a tight labour market and as a result had a relatively high level

of bargaining power) on-side. Discontent between older and younger employees also appeared within the cockpit staff,

because of the two tier employment system. Older employees were able to maintain their benefit and pay levels while

younger employees were hired at lower entrance levels and with different benefit packages. With time, however,

management seems to have succeeded in achieving the mental change it so much desired.

EVALUATION

The pay agreement of 1999 represents a clear turning point in collective bargaining at Lufthansa during the last decade.

The deal can be interpreted as a result of both parties considering the reconstruction process following the 1991/92 crisis

as being completed. Management regards the 1999 agreement as a matter of credibility, and thus allowed for adequate

pay increases after years of sacrifice. Collective bargaining on employment and competitiveness in Lufthansa made a

significant difference and contributed to the saving of the company. As Lufthansa has stated: Successful labour relations

are underpinning Lufthansas transition. It has to be explicitly acknowledged that, although the transformation period




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may thus far be regarded as successful, employees and management at Lufthansa are quite aware that business is a

continuous process. Consequently, the struggle to secure jobs and achieve long-term competitiveness may never end.

T. Schulten, H. Seifert and S. Zagelmeyer


For more information about Foundation research on this subject, please contact:

Camilla Galli da BinoInformation Liaison Officer

Telephone: (353 1) 204 31 25Fax: (353 1) 282 64 56

E-mail: [email protected]

The European Foundation for the Improvement of Living and Working Conditions is a tripartite EU body, whose role is

to provide key actors in social policy making with findings, knowledge and advice drawn from comparative research.The Foundation was established in 1975 by Council Regulation EEC No 1365/75 of May 1975.

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